Options Quant > Proprietary Trading Results vs. Client's Trading Results

It is very important to understand the impact of various fees on the trading program performance.

Performance figures listed on our web site are based on our proprietary trading in a model account with real money. Since the client pays either a trading signals fee ($50/month or less, depending on subscription period) or a performance fee (20% on new net profits or less, depending on account size - this compensation model is not currently available), the client's rates of return will be lower. We will show the impact of fees on client's performance in the following examples.

Example #1: the client pays a trading signals fee of $250 per six months and his account size is $50,000.

Assuming we achieved an annualized profit of 22% ($5,500 profit in six months in a $50,000 account), the trading signals fee of $250 lowered the rate of return from 22% to 2x($5,500-$250)/$50,000x100%=21%

Example #2: the client pays a trading signals fee of $50 per month and his account size is $14,000.

Assuming we achieved the same annualized profit of 22% (approximately $245 profit in one month in a $14,000 account), the trading signals fee of $50/month decreased the rate of return from 22% to 12x($245-$50)/$14,000x100%=16.7% annualized

Example #3: the client pays an incentive (performance) fee of 20% on new net profit (for accounts under $50,000)

Let us assume we achieved an annualized profit of 22% in our proprietary trading. After deducting 20% from the 22% trading profit, client's actual rate of return (after fees) will be 22% x (1 - 20/100)  = 17.6% - a "pro-forma rate of return"